Life Insurance Beneficiary

Who is a life insurance policy's beneficiary in a contract where no beneficiary is named?

My husband recently died and I found out that no one was listed as his beneficiary on his life insurance. Who will get the proceeds from this policy? I am the second wife and his two children are grown and on their own.

Published: Dec 27, 2010

Consult with a wills & trusts attorney to learn more about your state's rules.

Life insurance is a contract between the insurance company and the person insured. A third-party beneficiary receives the benefit of this contract directly when the insured dies. A benefit to a beneficiary is not probated. It is outside of the reach of the decedent’s creditors.

You raise the question, “Who is a life insurance policy’s beneficiary in a contract where no beneficiary is named?” I need to define a few terms and discuss probate law before addressing your question.

Death, Debt, Assets, and Inheritance

When a person passes away, the decedent’s debts or assets do not automatically pass to his or her spouse, children, or anyone else. Debts incurred by an individual are owed solely by that individual. If a person dies before his or her debt is paid, then the creditor can attempt to collect the debt from the individual’s estate, meaning that the debt would be paid before any money or other assets are passed to his or her heirs. However, if the person dies without sufficient assets to pay off the debt, then the debt is uncollectible and the creditor will likely write it off its books.

Although a surviving relative is not liable to pay debts of the deceased out of his own assets, the probate court may require that any property belonging to the estate be paid to creditors before the heirs receive any inheritance.

What is true for decedent’s debts is true for his or her assets. A deceased person’s assets are distributed according to the decedent’s will. If the decedent has no will, the assets are distributed according to the decedent’s state law. A court-appointed administrator pays the decedent’s debts and distributed the remainder to heirs according to the state’s rules. If a decedent has a spouse and no children, the surviving spouse inherits 100% of the decedent’s estate -- after debts are paid. If a decedent has children and a spouse, the children as a class receive 50% and the spouse receives 50%. However, if the decedent has a will, then an executor pays the debts and distributes the assets as directed in the will.

Life Insurance Beneficiary

If the decedent named a beneficiary or beneficiaries in the life insurance contract, the beneficiaries would receive the benefits directly and not through the probate process. Insurance benefits paid directly to the beneficiary are not affected by debt owed by the decedent.

However, if the decedent did not name a beneficiary, or wrote "my estate" as the beneficiary, then the benefit will go through the probate process. The benefit is treated like a bank account, mutual fund, or any other liquid asset owned by the decedent.

Your Question

If your state follows the common law and your spouse had no will, then as discussed above, an administrator will tally your spouse’s assets and liabilities, pay off the liabilities, and split any remainder with you and your spouse’s children. You will get 50% and the surviving children will split the other 50%. If your spouse had a will, then it will contain instructions for dividing the assets.

Consult with a wills, trusts, and estates attorney in your state to learn the general rules for your state. An attorney will ask you questions about your individual circumstances, and advise you more precisely than my brief analysis above.

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2 Comments

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AI

May, 2011

ann

Wadesboro, NC

my brother pass he had a loan that he used his car as collateral he had credit life insurance but named me as beneficary of it after the insurance payoff creditor do i get the car

1 Votes

BA

May, 2011

Bill

A decedent's assets (things he or she owned and rights he or she had) and liabilities (unpaid bills and obligations) are called the decedent's estate. In a process called probate the estate's executor will tally all of the assets and liabilities. If the assets are greater than the liabilities, all of the decedent's bills and obligations are paid. The remainder is distributed according to the decedent's will or the laws of the decedent's state of residence. If the decedent's liabilities are larger than the assets, then the executor will follow the state distribution rules. This is a simplified explanation, but it conveys the general idea.

Just because you are the beneficiary of an insurance policy does not mean you have a right or claim to the decedent's estate. The estate's executor will distribute any property or funds according to the decedent's will or the decedent's state laws.

In summary, the decedent's estate must go through the state's probate process. Consult with a lawyer in the decedent's state who has probate experience to learn how to begin this process.